Crypto 101: Introduction to Stablecoins, and various other Cryptocurrencies.
What is Cryptocurrency? š²
Cryptocurrency is typically decentralized digital money designed to be used over the internet. Bitcoin, which launched in 2008, was the first cryptocurrency, and it remains by far the biggest, most influential, and best-known. In the decade since, Bitcoin and other cryptocurrencies like Ethereum have grown as digital alternatives to money issued by governments.
The most popular cryptocurrencies, by market capitalization, are Bitcoin, Ethereum, Bitcoin Cash and Litecoin. Other well-known cryptocurrencies include Tezos, EOS, and ZCash. Some are similar to Bitcoin. Others are based on different technologies, or have new features that allow them to do more than transfer value.
How does cryptocurrency work? š¤
Bitcoin is the first and most well-known, but there are thousands of types of cryptocurrencies. Many, like Litecoin and Bitcoin Cash, share Bitcoinās core characteristics but explore new ways to process transactions.
At its most basic, a blockchain is a list of transactions that anyone can view and verify. The Bitcoin blockchain, for example, is a record of every time someone sends or receives bitcoin.
This list of transactions is fundamental for most cryptocurrencies because it enables secure payments to be made between people who donāt know each other without having to go through a third-party verifier like a bank.
Blockchain technology is also exciting because it has many uses beyond cryptocurrency. Blockchains are being used to explore medical research, improve the sharing of healthcare records, streamline supply chains, increase privacy on the internet, and so much more.
The principles behind both bitcoin and the Bitcoin blockchain first appeared online in a white paper published in late 2007 by a person or group going by the name of Satoshi Nakamoto.
The blockchain ledger is split across all the computers on the network, which are constantly verifying that the blockchain is accurate. This means there is no central vault, entity, or database that can be hacked, stolen, or manipulated.
Advantages of Cryptocurrency š
Crypto makes it possible to transfer value online without the need for a middleman like a bank or payment processor, allowing value to transfer globally, near-instantly, 24/7, for low fees.
Cryptocurrencies are usually not issued or controlled by any government or other central authority. Theyāre managed by peer-to-peer networks of computers running free, open-source software. Generally, anyone who wants to participate is able to.
If a bank or government isnāt involved, how is crypto secure? Itās secure because all transactions are vetted by a technology called a blockchain.
A cryptocurrency blockchain is similar to a bankās balance sheet or ledger. Each currency has its own blockchain, which is an ongoing, constantly re-verified record of every single transaction ever made using that currency. Unlike a bankās ledger, a crypto blockchain is distributed across participants of the digital currencyās entire network
No company, country, or third party is in control of it; and anyone can participate. A blockchain is a breakthrough technology only recently made possible through decades of computer science and mathematical innovations.
Key concepts of Cryptocurrency āļø
Transferability
Crypto makes transactions with people on the other side of the planet as seamless as paying with cash at your local grocery store.
Privacy
When paying with cryptocurrency, you donāt need to provide unnecessary personal information to the merchant. This means your financial information is protected from being shared with third parties like banks, payment services, advertisers, and credit-rating agencies. And because no sensitive information needs to be sent over the internet, there is very little risk of your financial information being compromised, or your identity being stolen.
Security
Almost all cryptocurrencies, including Bitcoin, Ethereum, Tezos, and Bitcoin Cash are secured using a technology called a blockchain, which is constantly checked and verified by a huge amount of computing power.
Irreversibility
Unlike credit card payments, cryptocurrency payments canāt be reversed. For merchants, this hugely reduces the likelihood of being defrauded. For customers, it has the potential to make commerce cheaper by eliminating one of the major arguments credit card companies make for their high processing fees.
What is a stablecoin? šŖ
USD Coin is an example of a cryptocurrency called stablecoins. Stablecoins offer some of the best attributes of cryptocurrency (seamless global transactions, security, and privacy) with the valuation stability of fiat currencies. Stablecoins do this by pegging their value to an external factor, typically a fiat currency like the U.S. dollar or a commodity like gold.
As a result, their valuations are less likely to shift dramatically from day to day. That stability can increase their utility for everyday use as money because both buyers and merchants can be confident that the value of their transaction will remain relatively consistent over a longer timeframe. They can also work as a safe and stable way to save money, like a traditional savings account.
What can you do with cryptocurrency?
Thereās a wide range of things you can do with cryptocurrency, and the list grows with time. Here are a few ways to get started, from participating in everyday activities to exploring new technological frontiers:
- Shop: Over 8,000 global merchants accept cryptocurrency via Coinbase Commerce.
- Donate to causes: There are benefits to donating and accepting crypto, and many nonprofit organizations accept bitcoin donations.
- Gift it: Cryptocurrency makes a great gift for friends and family who are interested in learning about new technology.
- Tip someone: Authors, musicians, and other online content creators sometimes leave Bitcoin addresses or QR codes at the end of their articles. If you like their work, you can give a little crypto as a way of saying thanks.
- Explore unique new combinations of money and technology: Orchid is a VPN, which helps protect you when youāre online, and a digital currency at the same time. Basically, itās broken down into two parts, the Orchid VPN app and the OXT cryptocurrency, and it all runs on the Ethereum network.
- Travel the world: Because cryptocurrency isnāt tied to a specific country, travelling with crypto can cut down on money exchange fees. Thereās already a small but thriving community of self-titled ācrypto nomadsā who primarily, or in some cases exclusively, spend crypto when they travel.
- Buy property in a virtual gaming world: Decentraland, which also runs on the Ethereum blockchain, is the first virtual world entirely owned by its users. Users can buy and sell land, avatar clothing, and all kinds of other stuff while partying in virtual nightclubs or mingling in virtual art galleries.
- Explore decentralized finance, or DeFi: A wide variety of new players are aiming to recreate the entire global financial system, from mutual-fund-like investments to loan-lending mechanisms and way beyond, without any central authorities.